MANILA: Dalian iron ore fell on Wednesday, heading for a third straight monthly drop, after a survey showing a contraction in China’s factory activity raised doubts about an economic rebound in the world’s top steel producer and consumer.

The most-traded iron ore, for January delivery, on China’s Dalian Commodity Exchange stretched its losses to a third session, ending morning trade 2.9% lower at 677 yuan ($98.16) a tonne, its lowest since Aug 22.

On the Singapore Exchange, the steelmaking ingredient’s most-active October contract was down 0.5% at $96.80 a tonne, as of 0410 GMT. China’s factory activity extended declines in August as new Covid-19 infections, the worst heatwaves in decades and an embattled property sector weighed on production, a survey showed.

“China’s economic weakness is increasingly becoming demand-driven. Consumption and investment sentiment among households and enterprises is weak, increasing the risk of a deflationary spiral,” said Raymond Yeung, ANZ chief economist for Greater China.

Fresh Covid outbreaks in China are raising fears of further lockdowns in the world’s biggest iron ore consumer ahead of the 20th Communist Party Congress beginning on Oct. 16.

“We still feel that President Xi Jinping’s expected re-election in October/November will be the focal point for any potential shift away from China’s stringent Covid strategy,” said Atilla Widnell, managing director at Navigate Commodities. “Until then, it will be more of the same-same in the form of C-induced mass testing and lockdowns, property bond defaults, property sector bailouts, and dovish comments.”

The bearish medium-term outlook for steel demand in China also weighed heavily on other steelmaking inputs, with Dalian coking coal down 2% and coke dropping 2.6%. Their benchmark January contracts were also down for a third straight session.